A large portion of the fresh movies that you can watch on Netflix's Watch Instantly streaming service are supplied through a deal with Starz. Like Toy Story 3 and Let Me In. Well, they're going to disappear on February 28.

Netflix just signed a deal allowing them to stream 2,500 Starz Play movies to their subscribers,…
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Starz announced today that contract negotiations with Netflix have broken down and that when the current contract expires on February 28, 2012, their content will no be available on the streaming service.

"Starz Entertainment has ended contract renewal negotiations with Netflix. When the agreement expires on February 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform. This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content. With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business."

We're not just talking newer releases that are made available thanks to the Starz deal. Everything from action favorite Big Trouble in Little China to Casino to Night of the Living Dead to The Toxic Avenger, along with 1000 other titles, are all courtesy of Starz. (Update: Night of the Living Dead is in the public domain, but it's currently listed as a Starz Play title, weirdly.)

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This is bad news on the day after you needed to decide which Netflix streaming/DVD at home account you want before getting hit with a $6 monthly increase to your current subscription.

This isn't the first time Starz and Netflix have disagreed on what some believe to be an agreement that heavily favors Netflix. Earlier this year Starz announced they would be adding a 90-day waiting period for TV with movies following for Netflix Instant Streaming.

Oh Netflix, which entertainment industry entity won't you terrify? Starz has declared a 90-day …
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Fortunately, Netflix has several months to lure Starz back to the table, or secure other deals like the one it's got with Paramount, Lionsgate and MGM via Epix to fill in the hole. But as Netflix grows, it's increasingly difficult for the service to convince Hollywood that its service won't destroy the film and television industry. Netflix knows that it's gonna need the studios on its side to build out Watch Instantly as the DVD business slowly crumbles—and they're going to have to pay dearly for it, like they did for Mad Men, at $1 million an episode. Can Netflix afford it? [PR NewsWire via The Next Web]

Netflix has reached an agreement with Epix to include films from Paramount, Lionsgate and MGM…
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UPDATE: Business Insider spoke to Netflix CEO Reed Hastings about today's announcement from Starz. He thanked Starz for being a content partner and explained that Starz content was a huge percentage of views a few years ago but that viewership has dropped off.

Because we've licensed so much other great content, Starz content is now down to about 8% of domestic Netflix subscribers' viewing. As we add a huge more content in Q4, we expect Starz content to naturally drift down to 5-6% of domestic viewing in Q1. We are confident we can take the money we had earmarked for Starz renewal next year, and spend it with other content providers to maintain or even improve the Netflix experience.